WASHINGTON — Sen. Chris Dodd's decision to stay as chairman of the Banking Committee while also continuing to play a lead role on the administration's No. 1 priority — health-care reform — left observers predicting Wednesday that enacting financial regulatory reform will be further delayed.

At a press conference Wednesday with other Senate leaders, Dodd pledged to continue working closely on the issue, but it was clear that health care was his first priority. The Connecticut Democrat would not commit to a time line for moving a regulatory reform bill or offer any details on what a draft may include.

Had Dodd ceded his role on health care, it's likely that he could focus exclusively on regulatory reform, observers said. As it is, it appears regulatory reform will remain on the back burner until health-care reform is finished.

"Health care is certainly taking the front seat," said James Barth a senior fellow at the Milken Institute. "There is a lot more lobbying taking place behind the scenes right now on regulatory reform … It's more on the slow track than on the fast track."

Dodd's decision was something of a surprise, as speculation has grown since the death of Sen. Edward Kennedy that he would succeed the Massachusetts Democrat as chairman of the Health, Education, Labor and Pensions Committee. Since Kennedy was diagnosed with brain cancer last year, Dodd has served as the Senate's point man on health-care reform, and many expected he would formalize that role by taking over the HELP panel.

Instead, he chose to essentially keep that role informally, but continue to chair the Banking Committee. The decision was blessed by both Senate Majority Leader Harry Reid and Sen. Tom Harkin, who will chair the HELP Committee.

Many said that means Dodd will continue to be distracted attempting to wrangle health care through the Senate.

"Nothing is impossible, but one struggles to see how the Senate could pass a financial reform bill this year even if Sen. Dodd had no other commitments," said Jaret Seiberg, a financial services policy analyst for the Washington Research Group. "Giving him health-care reform just makes any already steep climb even steeper."

But observers also said his decision raises the stakes in a bid to complete regulatory reform of the financial sector. Facing a tough re-election bid next year, financial services lobbyists and policy analysts said Dodd will feel like he must show some concrete results before the midterm elections in 2010.

"The bottom line is that nothing is written in stone," said Brian Gardner, an analyst with KBW Inc. "The whole process and time line for financial services legislation is totally up in the air and is going to keep everyone on Wall Street and in Washington guessing for at least the next several months."

Analysts said Dodd will continue to try and improve his standing back home, where he has been accused of being too close to the financial services industry, by using his bully pulpit to prove he's tough on banks. Many said such an approach could backfire, and even complicate getting a bill enacted.

"One of the things that I am worried about is that his personal scandals are all tied to the financial sector, his connections to AIG, his connections to Countrywide, these are the things that took him down in the polls in Connecticut, so his approach to reform is from a fairly hostile industry vantage and he may be unnecessarily hostile to the industry," said Chris Low, the chief economist First Horizon National Corp.'s FTN Financial.

But his fellow Democrats on the Banking Committee are unlikely to go along with a bill that the industry sees as draconian.

Several, including Sen. Mark Warner, D-Va., and Tim Johnson, D-S.D., are moderate and pro-business, and would likely be reluctant to support radical changes.

"I don't think it's going to be easy for Dodd to come up with a bill that actually helps him," Low said. "There is so much resistance to the consumer financial protection agency, it's going to be difficult to pass it in its current form."

Dodd is also pursuing a harder line than the Obama administration when it comes to safety and soundness regulation of banks. While the Obama plan would fold the Office of the Thrift Supervision into the Office of the Comptroller of the Currency (renaming it the national bank supervisor in the process), sources said Dodd is leaning toward the creation of a single prudential regulator for all institutions.

Dodd is also thought to prefer the creation of an interagency systemic council over giving the Federal Reserve Board such power — another break with the Obama plan.

Asked at the press conference Wednesday about whether he supported a single prudential regulator, Dodd said, "I won't negotiate here," but added, "but we are working on it."

He declined to answer other questions about the shape of reform — or even if he would keep the banking chair if he wins re-election in 2010.

"I'm preserving my seniority down the road … a lot can happen between now and then," he said.

Dodd remains the senior Democrat on two other panels: HELP and Foreign Relations.

Dodd said he recognized the issue was "complicated" and planned to "deal with this as comprehensively as we can."

But he acknowledged that the self-imposed deadline of this year might slip.

"I am hesitant to talk about deadlines but our goal would be to try and get something done if we could this year," he said. "This is about as large a change that would occur in the financial regulatory structure since the 1930s and we realize that undertaking that responsibility requires very careful deliberation."

Ultimately, though he said sticking at banking was a "difficult decision," he said he was committed to seeing regulatory reform all the way through.

"This is the right decision for me," he said. "I enjoy the work… there are a lot of issues under the jurisdiction of banking and frankly there, staff with me were saying let's get it done."

He added that, "We've done already a lot of work on that committee but obviously the major reform elements of financial regulation are before us. I want to get that job done."

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